Last week I revealed that Local Housing Allowance (LHA) – the form of Housing Benefit paid for private rented properties – was to be frozen from April 2012 to March 2013. This policy will have devastating consequences for the entire housing rented sector. Later last week I revealed that LHA will be set annually from 2013 onwards as well and that government plans were for LHA to rise at 2% per year while it expected private rents to rise at 4% per year. This argued that the devastating consequences for housing were exacerbated and I represented this on a simple graph which showed just how much a private tenant will have to make up the private rent from earnings, savings or benefits.
The post was viewed widely and many readers were not aware for example that the average private tenant currently has to find £57 per week on top of the LHA housing benefit to meet the rent. That £57 per week figure will increase significantly making private rented housing unaffordable and unsustainable for the tenant and for the private landlord.
I also commented that the Housing Minister and his department the CLG were not aware of the LHA freeze and subsequent LHA policy that was imposed by their colleagues in the DWP.
The DWP imposed LHA policy changes the CLGs version of the rent inflation policy and below I represent this revised policy in a further graph that will stagger all those in the housing sector.
Take a look at the chart below that represents government policy on rent. It shows that government policy is one of convergence of social housing rent levels with private housing rent levels. It also demonstrates that social housing rent levels will eventually overtake private rented levels.
Chart 1 – Coalition rent inflation policy
Private rent benefit in-payment levels (LHA) have always been considerably higher than council or housing association benefit levels (HB). As the graph above shows the current position according to the latest official DWP statistics is £76.42 per week for HB in social housing (council and HA rent average) and £111.69 per week for LHA in private renting. LHA average payment is 46% higher than HB payment. I have many times reported before that LHA paid to private landlords costs the public purse £3.2bn per year than we pay for equivalent social housing properties in housing benefit. Additionally the majority of private sector landlords are unregulated and we pay these unregulated PSLs £2.3bn per year more than we pay the regulated private sector landlords whose HB payments are similar to what we pay housing associations.
Frankly I don’t know where to begin on the unbelievably devastating consequences for the housing sector the above graph reveals. I could easily scribe 6 doctoral theses on the impact this policy will have and that’s without the impact of the ‘Affordable Homes’ programme and the impact Universal Credit will have in a few years time. It’s without the impact of the 5% increase in numbers the DWP foresees in 2013 which now surely must be a significant underestimate. I am not even sure I can see all the major consequences this policy will have – all of them will be hugely negative on tenants (social and private), landlords (social and private) and the taxpayer.
The comments I made on the LHA freeze last week and how private renting is unaffordable for the tenant and unsustainable for the private landlord and both of these for the UK public purse and wider economy are now a chronic understatement.
Evictions of current private tenants will rocket leading to hugely increased homelessness and homeless cost. Private landlords will definitively no longer accept tenants on benefits placing huge strains on the already overstretched social rented sector. If you thought the rented housing sector was in crisis now, which it is, then this is nothing compared to the effect and impact the Coalition’s benefit rent policy will have. Britain won’t be able to work as it won’t be able to house it workers is not an overstatement of the severity of this DWP-imposed Coalition policy. The 3-day week and the winter of discontent will seem happy memories compared to the consequences of this and, unfortunately, that’s not hyperbole!
No doubt I will return to this and develop many of the specific arguments as to the impact of this inept policy in the coming days and weeks. But for now just look at the graph, rub you eyes, repeat that process, go and make a coffee and come back and look again. Then make a simple spreadsheet using the Coalition rent inflation figures then create your own graph. It will look exactly the same as the one above!